Audit faults Mo. program for contamination cleanup
Thursday, April 10, 2014
By DAVID A. LIEB
JEFFERSON CITY, Mo. (AP) -- Missouri Auditor Tom Schweich raised concerns Thursday about a state tax incentive for developers to clean up contaminated old business sites, saying that poor oversight has allowed conflicts of interest and higher-than-necessary costs.
The state authorized more than $185 million of Brownfield Remediation Tax Credits for 115 projects from the 2003 to 2013 fiscal years, according to Schweich's audit. About four-fifths of those projects were in the St. Louis area.
Schweich gave the program a "poor" rating, the lowest possible result on his office's four-step grading scale.
He said in an interview that Department of Economic Development officials need to ensure there is "increased competition, eliminate the conflicts of interest, verify the work was done and verify the jobs" that developers said would be created.
The department published a proposed rule change last month for the Brownfield tax credit program that Schweich said would address many of his concerns.
Missouri is one of 13 states that offer tax credits for developers to clean up hazardous substances at old industrial or commercial sites. Established in 1995, the Missouri program requires the contaminated sites to have been abandoned or underutilized for at least three years to qualify for the tax incentives.
Developers can receive tax credits worth up to the full cost of the supplies, equipment, labor, professional services, demolition and asbestos removal necessary to get rid of the hazardous substances so that the sites can be used for new purposes.
In six of the 15 projects reviewed closely by state auditors, the Department of Economic Development authorized tax credits for 100 percent of the costs.
The audit said developers have "little or no incentive" to hold down remediation and demolition expenses when they can receive tax credits for the full costs. It also faulted the department for not requiring developers to solicit bids for work on a competitive basis and failing to have a state policy restricting potential conflicts of interest.
The audit specifically cited the Northwest Plaza project in St. Louis County. The St. Louis Post-Dispatch reported last year that the department allowed a single company, Environmental Operations Inc. of St. Louis, to design an asbestos cleanup plan, manage the bid process and hire itself for the work.
The audit said that scenario "creates a conflict of interest and results in little assurance that the (tax credits) are the least amount necessary for the projects to be completed."
The department said in a written response attached to the audit that its newly proposed regulations prohibit conflicts of interest and formalize the process used by developers to select contractors. The agency said it follows state law by awarding tax credits in the least amount necessary for the cleanup projects to occur.
As it has with other tax credit programs, the auditor's office also questioned whether the tax credits were creating as many jobs as advertised. For 10 completed projects that it examined, developers had projected about 2,500 jobs would be created, but the audit said just 116 full-time jobs and 322 part-time jobs actually were reported as being created.
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